Biden Admin Shifting To Block JetBlue & Spirit Merger

This shouldn’t come as a lot of a shock, however it seems just like the merger between JetBlue and Spirit might face some regulatory points sooner reasonably than later…

DOJ will file lawsuit to dam JetBlue & Spirit merger

POLITICO is reporting that the Division of Justice (DOJ) will quickly be submitting a lawsuit to dam the merger between JetBlue and Spirit. Based on sources, this might occur as quickly as March 2023, although no last resolution has been made.

Federal antitrust regulators have been busy below the Biden Administration, in the identical means that we’re seeing the DOJ presently difficult the American and JetBlue Northeast Alliance (no last resolution has been made there but).

As a reminder, the $3.8 billion merger between JetBlue and Spirit was introduced in July 2022. It was fairly a tough highway to even get to that time, since in February 2022 it as introduced that Frontier and Spirit would merge.

JetBlue did every thing it might to dam that, together with making an attempt a hostile takeover, and that labored. The merger plans between Frontier and Spirit have been terminated simply shortly earlier than the JetBlue deal was introduced.

The DOJ intends to dam the JetBlue & Spirit merger

JetBlue & Spirit have been anticipating DOJ scrutiny

Understand that simply because the DOJ plans to problem this merger doesn’t imply it gained’t find yourself taking place. The most probably consequence is that some concessions will must be made for the merger to be authorized, whether or not it’s giving up slots at sure airports, committing to a specific amount of presence in some markets, and many others. As a matter of reality, it will have been shocking if the merger have been authorized with none challenges.

Clearly JetBlue and Spirit have been anticipating this, and that’s one of many causes that the merger between Frontier and Spirit was initially favored. When the JetBlue merger was introduced, the plan was just for the deal to shut within the first half of 2024, reflecting how lengthy of a highway this might be.

For that matter, Spirit’s inventory value clearly displays concern over this deal being authorized. The deal requires JetBlue buying Spirit for $33.50 per share in money. Presently Spirit’s inventory value is lower than 60% of that, which is a direct reflection of this concern.

JetBlue & Spirit knew they’d get scrutiny with this deal

My tackle the DOJ difficult the JetBlue & Spirit merger

I’m torn on this.

On the one hand, I don’t suppose the merger between JetBlue and Spirit might be good for competitors. JetBlue and Spirit each deliver one thing distinctive to the market, and I worth each airways. However I’m unsure they’re nice collectively. It’s much like how I like ice cream and I like pizza, however I don’t need pizza flavored ice cream. This merger would go away Frontier and Allegiant as the one main extremely low price provider in america.

Alternatively, blocking a merger between JetBlue and Spirit looks as if an arbitrary place to attract a line. Prior to now 15 years we’ve seen mergers between the largest airways within the US, with regulators dong virtually nothing. The time to dam issues would have been again then, after we noticed the formation of contemporary day American, Delta, and United.

However to now immediately block a merger that may result in an airline that can nonetheless be considerably smaller than the “massive 4” looks as if an arbitrary place to attract a line. This additionally displays the completely different approaches taken by completely different administrations.

I’d miss Spirit’s “Massive Entrance Seat” if this will get authorized

Backside line

Not surprisingly, the Division of Justice is planning to file a lawsuit over the JetBlue and Spirit merger, and it might occur as quickly as March. The Biden Administration is taking a tougher stance on the subject of antitrust issues, and this displays that.

It stays to be seen if something comes of this. The most probably consequence is that some concessions should be made. The worth of this deal appeared marginal to start with, and this might solely make the worth proposition even worse.

What do you make of the DOJ submitting go well with over the JetBlue and Spirit merger?

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